Mark Perry: Keeping Fossil Fuels Underground Makes No Sense

Even environmentalists should welcome the transition from coal to natural gas and reconsider their infatuation with renewables and efforts to keep fossil fuels in the ground.

What would happen if climateers succeed in their campaign to keep fossil fuels in the ground?

The experience of Walt Disney World in Orlando more than 40 years ago provides some answers. In 1973, two years after it opened, plans to expand Disney World beyond the original theme park were jeopardized when war broke out in the Middle East. An oil embargo was placed on Western countries, and President Nixon introduced gasoline rationing and price controls that lasted for nearly a decade under three U.S. presidents: Nixon, Ford and Carter. For a resort that received the majority of its visitors by car, the price controls and rationing were nothing short of a disaster. Attendance at the Magic Kingdom crashed, and Disney’s share price fell by more than half.

It wasn’t just Disney World and Florida tourism that suffered from the spike in gasoline prices. Areas from Chicago to Houston to Los Angeles to Phoenix experienced a similar crash, with motorists lining up for hours to fill their cars with gasoline. Businesses and construction projects suffered, factories closed and several million Americans lost their jobs during the 1973-1975 recession that was largely the result of the shock of higher energy prices.

In time, the economy returned to normal. So, too, did energy markets when President Reagan finally abolished all price controls on oil and gas in 1981. And, eventually, thanks largely to the shale revolution, U.S. oil production in recent years has risen to near record levels, resulting in a sharp decline in oil imports (the lowest in nearly 50 years as a share of oil consumed) along with much cheaper gasoline.

For the average American, energy has never been more affordable. As a share of total consumer spending, Americans spent less than 4 percent on energy during each of the last two years, the lowest in history. Today the U.S. leads the world in oil and gas production, and we are more energy secure and competitive in international markets. None of this would have been possible without the Shale Revolution and the increase in energy production.

But these gains may be in peril. If those opposed to oil and gas drilling get their way, we could experience an upheaval in energy markets similar to what happened during the embargo of the 1970s.

While the arguments in favor of oil and natural gas are well-known, restricting their production in the United States would be tragic. In contrast to fossil fuels, solar and wind energy are carbon-free and their share of the nation’s energy will grow in the years ahead, but these renewables contribute only marginally to U.S. energy supplies. Combined, solar and wind, according to the Energy Information Administration, supply only a little more than 3 percent of the energy Americans use today. And EIA estimates that solar and wind power together will provide less than 10 percent of America’s energy in 2050. In contrast, oil and natural gas supply more than two-thirds of the nation’s energy and the EIA forecasts that share will continue through 2050 and beyond.

What’s conveniently ignored by many environmentalists is that natural gas is essential for the growth of solar and wind power, since it’s needed as a back-up fuel on days when the weather is not cooperating. A 1,000-megawatt gas plant releases less than half the amount of carbon dioxide as a coal plant of the same size. As a result of the continuing shift from coal to gas at power plants, U.S. carbon emissions from electricity production are now the lowest in nearly 30 years. Replacing additional coal plants will reduce emissions even more. The reality is that the U.S. is a world leader in the reduction of greenhouse-gas emissions due to the increased use of natural gas.

The world needs more oil and gas, not less. Yet environmentalists want to shut down production. Despite the demand for energy, decades-old bans on oil and gas production are still in place in large parts of the American West and offshore. President Trump recently proposed opening up 90 percent of the oil and gas that lies beneath the Outer Continental Shelf, but the leasing of offshore tracts is many years away. Meanwhile, New York State and Maryland have clamped bans on hydraulic fracking for oil and gas, and the regional Delaware Valley Basin Commission is considering a plan to prohibit the use of fracking in the Marcellus shale that underlies part of Pennsylvania.

Today’s energy challenge for the U.S. is to remain competitive in global markets for oil and gas. “Keep-it-in-the-ground” environmentalists who want to halt U.S. production ignore the effects such a radical approach would have on the U.S. economy and environment.